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When Is Exchange of Contracts When Buying a Property?

Buying a property is a big financial decision that involves several legal processes. One of the most crucial stages is the exchange of contracts. This is where the buyer and seller swap signed contracts and agree to a transaction. But when exactly does this happen? Here is a breakdown of the key stages leading up to the exchange of contracts.

1. Offer acceptance

When the buyer finds a property they want to buy, they make an offer to the seller, usually through an estate agent. The seller can accept, reject or make a counteroffer. Once the buyer`s offer is accepted, the buyer usually instructs a solicitor or conveyancer to handle the legal process.

2. Searches and surveys

The buyer`s solicitor conducts property searches to ensure there are no legal or environmental issues that could affect the property`s value. The buyer may also commission a survey to identify any structural problems that could affect the property`s price.

3. Mortgage approval

If the buyer is taking out a mortgage, their lender will conduct a valuation to ensure the property is worth the amount being borrowed. Once the mortgage is approved, the buyer`s solicitor receives a mortgage offer letter from the lender.

4. Exchange of contracts

Once all legal processes are complete, including the searches and surveys, and the mortgage has been approved, the buyer and seller are ready to exchange contracts. The buyer pays a deposit to the seller (usually 10% of the property`s price), and the signed contracts are exchanged. After this point, the buyer and seller are legally bound to complete the transaction.

5. Completion

On the agreed date, the remaining balance of the property`s price is transferred to the seller`s solicitor. The buyer then receives the keys to the property and becomes the legal owner.

In summary, the exchange of contracts is the stage when the buyer and seller are legally bound to complete the property transaction. It usually occurs after the buyer has conducted legal searches, commissioned a survey, secured a mortgage, and paid a deposit. Once the contracts are exchanged, the buyer and seller are committed to completing the transaction on the agreed date.